By Nelson Mandela Muhoozi
The symbiotic relationship between agriculture and the Ugandan economy is undeniable, with the sector contributing significantly to exports, GDP, and employment.
The sector contributes 24.1% to the gross domestic product (GDP), 33% of export earnings, and about 70% of employment-based.
However, as the sector faces the erratic weather patterns, floods, landslides, and pest invasions, a solution lies in agricultural insurance, yet its uptake remains dishearteningly low.
Governments worldwide, including Uganda, have embraced agricultural insurance as a means to minimise financial losses for farmers, stabilise household income and boost financing for the sector predominantly comprised of smallholder farmers struggling to fully embrace this risk-mitigating tool.
However, farmers in Uganda are yet to wholly embrace the aspect of insurance in their agribusiness as not many of them insure their agribusinesses.
John Makosya, a senior consortium officer at Agro-Consortium Uganda, said as climate risks intensify and uncertainties persist, the need for comprehensive risk management tools like insurance becomes more evident.
“As a cornerstone of Uganda’s economy, agriculture’s inherent risks necessitate effective risk management strategies. But despite the potential benefits, the current penetration of agricultural insurance remains staggeringly low in Uganda, covering less than 1% of the farming population,” he noted during an interview with New Vision at Naguru on Friday.
Lack of awareness impeding progress
A study conducted by the Insurance Regulatory Authority (IRA) across 18 districts in Uganda in May 2022, revealed that a significant proportion of commercial farmers, who have the most to gain, have not even heard of agricultural insurance.
This knowledge gap translates into a mere 5% of sampled farmers having active insurance policies. The lack of awareness, inadequate sensitization, and limited promotion of agricultural insurance contribute to this concerning gap.
In a twist of fate, the Agriculture Insurance Consortium reported that 74,825 farmers across the nation were insured during the study period.
This juxtaposition of numbers highlights a glaring discrepancy in the adoption rates of agricultural insurance, particularly among commercial farmers.
IRA pointed fingers at the existing distribution model, citing its inadequacy in reaching all corners of the farming community, compounded by a lack of robust sensitization and promotion campaigns.
A Glimpse of Hope
Agro Consortium, a coalition of 13 insurance companies in Uganda is providing agriculture insurance under the Uganda Agriculture Insurance Scheme (UAIS).
The scheme attempts to bridge this gap by offering insurance subsidies to both small-scale and large-scale farmers in high-risk regions.
Although the uptake of agricultural insurance among commercial farmers remains low, Makosya said the trajectory of the sector’s growth is promising.
“Over a five-year period, the Agriculture Insurance business has witnessed substantial progress. Gross written premiums increased from sh5.2b in 2017 to sh19.8b in 2021, accompanied by a rise in the number of farmers insured, policies issued, and claims paid,” he said.
He said this upward trend indicates a burgeoning recognition of the value of agricultural insurance in safeguarding farmers’ investments.
Under the consortium, government provides sh5bn annually to subsidise farmers. However, this money was enough in the first 5 years. But in 2021, Makosya said the need was sh9bn, which means there is a gap. Additionally, in 2022, he said the need increased to sh10bn.
This, Makosya said, means that more farmers are realising the importance of insurance and coming to subscribe to the scheme.
However, now the farmers can’t get insured as the subsidy is not enough. We request the government to increase funding.
According to Makosya, the numbers have grown country-wide from about 5,000 farmers in 2015 to about 700,000 farmers in December 2022.
Because the sector faces the caprices of unpredictable weather patterns and natural disasters, he said the loss ratio has increased from around 24 percent to 60 percent.
Cultivating Resilience
As Uganda seeks to fortify its agricultural sector against the vagaries of nature, Ernest Magezi Barusya, chief executive officer, Kenbright Uganda, said bridging the gap in agricultural insurance uptake becomes paramount.
He said elevating awareness, providing tailored education, and fostering partnerships between stakeholders can be catalysts for change.
“By empowering farmers with the tools to manage risks, Uganda can nurture a resilient agricultural landscape that not only supports livelihoods but also propels the nation’s economy forward,” he said.
To help minimise losses, he said agencies have come up to set up weather stations to help with predicting weather partners. But he also said they are now placing more emphasis on awareness and educating the farmers on loss mitigation measures.
A digital dawn
Innovative channels have emerged, embedding insurance offerings within banks, microfinance institutions (MFIs), and savings and credit cooperative organizations (SACCOs), particularly aligned with agricultural loans.
Moreover, the digital revolution has enabled the integration of insurance into various financial platforms, offering farmers the convenience of bundled coverage with loans.
According to Alhaj Kaddunabbi Ibrahim Lubega the chief executive officer at the Insurance Regulatory Authority of Uganda, this is a game changer for the sector.
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The consortium has harnessed the power of technology, through platforms like Ensibuuko, M-Omulimisa, and Akello Banker, hailed as Fintechs and Agtechs.
These, he said, provide full profiles of farmers, facilitating the sale of insurance tailored to individual needs, and as such insurance becomes not just a shield against loss but a seamless part of the farmer’s financial ecosystem, even integrated into loans disbursed on these platforms.
“As awareness spreads, innovative channels proliferate, and success stories are shared, the tides may turn, ushering in an era of agricultural prosperity safeguarded against nature’s whims,” he said.
Challenges and potential ahead
Experts indicate that while the overall trajectory of agricultural insurance seems promising. However, because majority of farmers fall into the smallholder category, characterized by limited productivity, the challenges are more pronounced.
According to Agroeconomist, Erastus Ndege, the path forward involves raising awareness among farmers about the advantages of agricultural insurance, simplifying enrolment processes, and fine-tuning premium structures to ensure the broadest possible coverage for this critical sector.
“Agricultural insurance has the potential to be a game-changer, because it not only acts as a safety net against unpredictable climatic events but also encourages farmers to make more substantial investments by mitigating uncertainties,” Ndege said.
In a nation where agriculture forms the bedrock of livelihoods, he said the uptake of agricultural insurance holds the promise of transforming vulnerabilities into opportunities, bolstering the resilience of smallholder farmers and contributing to the nation’s overall economic growth.
